Freemium and The Internet: A Match Made in Heaven….or Hell

(Source: Dropbox.com)

, a dating app, launched Tinder Gold last year that had only one additional feature on top of existing paid product Tinder Plus. Tinder Gold lets a user see who had liked his/her profile without the need to swipe right on countless profiles to find a match. And it completely changed the trajectory of Tinder’s business adding a whooping 476,000 subscribers within just a quarter after the launch taking their total subscriber count from 2 million to 2.5 million.

Source

Acquisition is just the start; Engagement is end game

Customer churn is inevitable part of any business. And free customers are any ways less incentivized than paid ones to stick around making churn even more difficult to manage.

Successful companies try to overcome this challenge by making onboarding super slick so that user can experience core use case of the product as soon as possible and over time help her derive more and more value out of the product making it difficult to switch or leave.

Famous ‘Smile Graph’ of Evernote, a note taking and sharing app, is an excellent illustration of this idea. As you can see from the graph below that the percentage of users returning to the app drops first as few users churn out, but in second year it starts trending upwards as more and more users make Evernote an integral part of their professional/personal workflows.

(Source: Techcrunch)

That’s broadly it! To summarize, I’d say that Internet has made it possible to enable freemium model at a scale that wasn’t possible before. But you need to have the right ingredients — a valuable free product, very large market with some degree of virality, low cost to serve free customers, strong reason for customers to upgrade, and retention of both free and paid users — in place to make it tick, otherwise you will end up writing the obituary of your business with your own hands.

Are you aware of any other products/companies that have interesting freemium models? Let me know in comments.

Thanks Karan and Pooja for reading the drafts and suggesting the edits.

read original article here